Delhi District Court
Ito vs M/S South West Pinnacle (P) Ltd. on 31 March, 2015
IN THE COURT OF SH. DEVENDRA KUMAR SHARMA
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts):CENTRAL
TIS HAZARI COURTS, DELHI
ITO vs M/s South West Pinnacle (P) Ltd.
U/s 276B & 279(1) r/w Sec. 278E of Income Tax Act, 1961
JUDGMENT CC No.65/4 and 66/4
(a)Serial no. of the case : 02401R0397012014 (CC No.66/4)
02401R0397022014 (CC No.65/4)
(b)Date of commission of offence : FY 200809 & 200910
(c)Name of complainant : ITO Sh. H.S. Gautam
(d)Name, parentage, residence: 1)M/s South West Pinnacle (P) Ltd.
2) Piyush Jain (Already discharged)
Both at G112, Redge Wood Estate,
DLF, PhaseIV, Gurgaon, Haryana
Also at: A4, Pushpanjali Farm,
Bijwasan, Delhi110045
(e)Offence complained of/ proved : U/s 276B/279(1) r/w S278E of IT Act
(f)Plea of accused : Pleaded not guilty
(g)Final order : Accused no.1 company convicted.
(h)Date of such order : 31.03.2015
Date of Institution of complaint: 20.08.2014
Arguments heard/order reserved :30.03.2015
Date of Judgment : 31.03.2015
Brief statement of the reasons for the decision:
1. This common judgment will dispose off two complaint cases bearing no.65/4,
and 66/4 filed u/s 276B & 279(1) r/w Sec.278E of the Income Tax Act, 1961 (for
short the 'Act') for the Financial Year (for short 'FY') 200809 and 200910
respectively. Both these complaints were filed by the complainant Sh. H.S.
Gautam, the then Income Tax Officer against the accused no.1 company M/s
South West Pinnacle(P) Limited (for short the 'Company') and Sh. Piyush Jain
ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 1 of 10
as accused no.2. As the facts on the basis of which these complaints are filed
as well as evidence led are similar in both the complaint cases, therefore, first
of all complaint case no.65/4 pertaining to Financial Year 200809 is taken up
for test.
Vide order dated 03.02.2015 accused no.2 has already been
discharged as he was not the Director of accused no.1 company during
relevant periods and therefore, his role is not being discussed here. Now this
judgment is directed against the accused no.1 company only.
2. Succinctly, the facts of the case are that accused no.1 company is a Private
Limited company registered with the office of ROC. The company has
deducted TDS amount to the tune of Rs.70,86,362/ and Rs.12,65,569/ during
the relevant Financial Years but has not deposited the same with the
Government account within prescribed time. Hence, present complaint.
3. After precharge evidence, a charge was framed against the company
(through AR Sh. Jagdish Prasad Joshi) u/s 276B r/w section 278E and 279 of
the Act to which he pleaded not guilty and claimed trial.
4. In order to substantiate its allegations, the complainant Sh. H.S. Gautam
examined himself as PW1 in precharge evidence as well as post charge
evidence.
In his statement, PW1 SH. H.S reiterated the facts of the complaint and
stated that as per ITD System generated information, accused company had
ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 2 of 10
defaulted in deposit of TDS for the FA 200809 and as per document
Ex.PW1/A, the amount of default was Rs.70,86,362/. The company had also
defaulted for FA 200910 to the tune of Rs.12,65,569/ which is reflected in the
document Ex.PW1/B. PW1 has also proved on record relevant documents
like notice u/s 2(35) of the Act as Ex.PW1/C, its reply as Ex.PW1/D, show
cause notice Ex.PW1/E, certified copy of the order u/s 2(35) of the Act as
Ex.PW1/F, sanction as Ex.PW1/G and complaint as Ex.PW1/J. The witness
was cross examined at length on behalf of the accused.
5. Statement of accused no.1 company (through AR Sh. Jagdish Prasad Joshi)
was recorded u/s 313 Cr.P.C. read with section 281 Cr.P.C separately.
In the statement, delay in depositing TDS was admitted on behalf of the
company. However, it is stated that the delay in depositing TDS and the
interest on such delay was due to reasons beyond its control. Present
complaints have been filed just to harass the company as it had already
deposited the TDS along with interest for such delay. However, accused opted
not to lead any defence evidence.
6. I have heard the arguments on behalf of both the parties and gone through the
record of the case. I have also gone through the written submissions filed on
behalf of the complainant and relevant provisions of Income Tax Act, 1961.
7. Relevant provisions of section 276B, and 278E of the Act are reproduced
below for reference:
[276B. Failure to pay tax to the credit of Central Government under Chapter
ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 3 of 10
XIID or XVIIB. If a person fails to pay to the credit of the Central Government,
(a) the tax deducted at source by him as required by or under the provisions
of Chapter XVIIB; or
(b) the tax payable by him, as required by or under,
i. subsection (2) of section 115O; or
ii. the second proviso to section 194B,
he shall be punishable with rigorous imprisonment for a term which shall not be
less than three months but which may extend to seven years and with fine]
[278E. Presumption as to culpable mental state. (1) In any prosecution for
any offence under this Act which requires a culpable mental state on the part of
the accused, the court shall presume the existence of such mental state but it
shall be a defence for the accused to prove the fact that he had no such mental
state which respect to the act charged as an offence in that prosecution.
8. It is argued on behalf of the complainant that the case has been proved
beyond reasonable doubt against the accused company in view of the
testimony of PW1 as well as admission in the statement of accused recorded
u/s 313 Cr.P.C.
Learned defence counsel, on the other hand, argued that present
complaint have been filed just to harass the accused company as the TDS
amount along with interest had already been deposited by the accused prior to
filing of the present complaints and this fact has also been admitted by PW1 in
his cross examination in post charge evidence. There is no order passed u/s
201 of the Act declaring the accused company "assessee deemed in default"
u/s 201 of the Act so much so that no show cause notice was ever issued u/s
201 of the Act to the accused company which is prerequisite condition for
initiating prosecution u/s 276B of the Act and therefore, the instant complaints
filed are not maintainable. Since, company has already deposited the entire
amount of TDS along with the statutory interest with the government treasury,
ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 4 of 10
therefore, accused company is liable to be acquitted.
9. In rebuttal, it is argued on behalf of complainant that no notice/order u/s 201 is
required to be passed/served as section 201 of the Act specifies the
consequences of failure to deduct or pay tax and recovery proceedings and in
this case the recovery proceedings u/s 201 of the Act was not initiated as the
TDS amount along with interest had been deposited by the company. The
criminal proceedings are not dependent on the recovery proceedings.
Furthermore, the accused company has already been served with the notice
u/s 2(35) of the Act deeming the company to be assessee in default. It is
further submitted that admittedly the TDS amount was deducted but same was
not deposited in Government account well within time and later on deposit of
TDS and interest accrued on it does not preclude the accused from
prosecution. Reliance is placed upon the judgment "Madhumilan Syntex Ltd. &
Ors. vs. Union of India & Another and Rashida Kamaluddin Syed & Anr vs.
Shaikh Saheblal Mardan (Dead) through Lrs & Anr., JT (2007) 4 SC 159".
10.Section 2(35) of the Act contains expression 'principal officer'. Relevant para
of section 2(35) of the Act is reproduced below:
"(35) 'principal officer', used with reference to a local authority or a company or
any other public body or any association of persons or any body of individuals,
means
the secretary, treasurer, manager or agent of the authority, company or
association, or body, or
any person connected with the management or administration of the local
authority, company, association or body upon whom the [Assessing Officer] has
served a notice of his intention of treating him as the principal officer thereof'.
ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 5 of 10
11.Section 194A of the Act mandates the deduction of tax at sources on the
credit or payment of interest other than 'interest on securities'. Section 194
A(4) contains the expression "the person responsible for making the payment".
Section 204 of the Act defines the 'person responsible for payment'. Relevant
para of section 204 is reproduced as under:
"Section 204: Meaning of "persons responsible for paying"
*
* *
(iii) In the case of credit, or, as the case may be, payment of any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the principal officer thereof". Perusal of section 204(iii) of the Act clearly shows that in case of a company, the company itself, including the principal officer thereof, would be responsible to deduct the tax at source and deposit it with the department.
12.Chapter XVII of the Act specifies the collection and recovery of tax. Section 201 in Chapter XVII of the Act specifies the consequences of failure to deduct or pay tax deducted at source. The relevant provisions of section 201 is reproduced for ready reference:
201. Consequences of failure to deduct or pay. [(Where any person, including the principal officer of a company,
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in subsection (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax. From bare perusal of section 201 of the Act clearly shows that no such ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 6 of 10 notice u/s 201 of the Act is required to be given to the accused company prior to launching of the prosecution.
13.In [2010] 322 ITR 196 (Mad), the Hon'ble Madras High Court has held as under:
16. At this juncture, learned special public prosecutor appearing for the appellant Incometax Department would rely upon a decision of the Rajasthan High Court Jaipur Bench, reported in Universal Supply Corporation v. State of Rajasthan [1994] 206 ITR 222 (Raj), wherein, it is held as follows (headnote):
"In the Incometax Act, 1961, there are separate provisions for levy of interest, penalty and criminal prosecution. The charging of interest has a different purpose to compensate the Department for depriving it of the use of the money during the period the payment was withheld. Criminal proceedings have nothing to do either with the levy of interest or penalty. In the absence of these proceedings also, criminal prosecution can be launched if the ingredients of the offence under section 276B of the Incometax Act, 1961, namely, failure to pay the tax deducted at source to be credit of the Central Government within the prescribed time, are made out. The assessee can be charged with interest and also punished by prosecution.
The legal position can be sumarised as follows:
(i) The scope and purport of interest/penalty proceedings and prosecution under the Incometax Act are separate and independent. The existence or the absence of the one or the other is no bar to any one of them;
(ii) Simply charging of interest by the Department under section 201(1A) of the Act, for the delay in the payment of the amount to the Central Government, does not obliterate the prosecution;
(iii) The noninitiation of penalty proceedings does not lead to a presumption that the default in payment was for good and sufficient reasons or that the assessee was not obliged to establish that there were good and sufficient reasons for the default in payment;
(iv) Noninitiation of penalty proceedings in a case cannot be equated with a case where the penalty proceedings were initiated and a finding is recorded by the competent authority that there were good and sufficient reasons for the delay in payment.
14.In (2007) 11 Supreme Court Cases 297, the Hon'ble Supreme Court of India has held as under: ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 7 of 10
47. The next contention that since TDS had already been deposited to the account of the Central Government, there was no default and no prosecution can be ordered, can not be accepted. Mr. Rajit Kumar invited our intention to a decision of the High Court of Calcutta in Vinar & Co. v. ITO. Interpreting the provisions of section 276B, a Single Judge of the High Court observed that:(ITRp.
315) "[T]here is no provision in the Income Tax Act imposing criminal liability for delay in deduction or for nonpayment in time. Under Section 276B, delay in payment of income tax is not an offence."
According to the learned Judge, such a provision is subject to penalty under Section 201(1) of the Act.
48.We are unable to agree with the above view of the High Court. Once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under the Act. Interpretation convassed by the leaned counsel would make the provision relating to prosecution nugatory.
In view of the aforesaid case laws and discussions, the pleas of the accused is not sustainable at all and same is rejected.
15.Next contention of the accused was that the delay in depositing TDS and the interest on such delay was due to reasons beyond its control. However, this plea of the accused does not hold much water. Accused has not explained as to what has prevented or under which circumstances the TDS could not be deposited in time. Except bald statement, accused has not produced any document on record or led any defence evidence to show its banafide for not depositing the TDS within time.
16.The case of the prosecution is that the company deducted certain TDS amounts for the relevant financial years but failed to deposit the same with the Government account within prescribed time. The factum of nondeposit of tax ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 8 of 10 amount within time has been admitted by the accused company during statement recorded u/s 313 Cr.P.C. Thus, no further evidence is required to prove the case of the complainant. Admission is the best evidence to prove the allegations. Thus, in view of aforesaid case laws and admission by the accused company, the case of the prosecution stands proved.
17.Further, there is presumption u/s 278E of the Act of culpable mental state on the part of the accused. The company has taken a specific defence that the delay in deposit of TDS was neither deliberate nor intentional. But accused has failed to explain the reason and compelling circumstances for not depositing the TDS in time. There is nothing on record which suggests that the company was facing financial crisis or whatsoever any compelling circumstances during the relevant periods, which resulted into nondeposit of TDS in time. Thus, accused company failed to rebut the culpable metal state. All these facts clearly indicates that the company deducted the TDS for the relevant periods and did not deposit the same with government account within prescribed period intentionally and withheld the same deliberately with a malafide intention for its own use.
18.Undisputedly, the tax deducted at source by the accused no.1 company was not deposited within prescribed period. Company can not be allowed to use the tax amount so deducted for any other purposes. In view of the aforesaid discussions and facts and circumstances of the case, it is held that the prosecution has proved its case against accused no.1 company beyond ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 9 of 10 reasonable doubt. Accordingly, accused no.1 company is held guilty for the offence u/s 276B of the Act for deducting TDS for the relevant financial years and not depositing the same in the Government account within prescribed period in complaint case No. 65/4 FA200809.
Since, other complaint no.66/4 has also been filed with the identical allegations against accused no.1 for the aforesaid offence, therefore, accused no.1 company is also held guilty for the offence punishable u/s 276B of the Act in complaint case no.66/4 for Financial Year 200910. A copy of this judgment be placed in both complaint cases.
Let accused no.1 company be heard on sentence on 06.04.2015.
(DEVENDRA KUMAR SHARMA) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 31.03.2015 (Total number of page 10) (One spare copy attached) ITO vs M/s South West Pinnacle (P) Ltd. U/s 276B IT Act CC No.65/4, 66/4 and 67/4 10 of 10